1. EBRD 25th September 2009 Sarajevo
Public-Private Partnership in developing municipal infrastructure
EBRD 25th September 2009 Sarajevo 1

2. Agenda Introduction to the EBRD PPP – definition and rationale EBRD
EBRD Experience in PPPs

3. Introduction to EBRD
International financial institution, promotes transition to market economies in 27 countries from central Europe to central Asia
Owned by 62 countries and two inter- governmental institutions including countries of operation
Capital base of €20 billion

4. Introduction to EBRD
Mandated to finance projects in Central and Eastern Europe and former Soviet Union
AAA rated by Moodys and Standard & Poor’s
Provides debt and equity financing to state and private projects
>London headquarters
>30 Resident Offices in 27 countries

5. EBRD Differs from Commercial Banks
Mandate to foster transition from planned to market economies
The EBRD promotes environmentally sound and sustainable development in all its activities
Can finance projects without bank guarantees or sovereign guarantees
Willingness to try new products/structures
Broad market knowledge

6. Municipal and Environmental Infrastructure
MEI Investment Portfolio
MEI covers all forms of PPP related to municipal infrastructure:
Water/Wastewater
Solid Waste
Urban Transport
District Heating

7. Selected Water and Wastewater Projects
Zagreb Waste Water Treatment Plant
Croatia
€55.2 million syndicated
loan
December 2001
Construction and operation of wastewater treatment plant
Tallinn Water Limited Privatisation
Estonia
€31 million syndicated
loan
October 2001
Partial privatisation of AS Tallinna Vesi
Sofia Water System Concession
Bulgaria
€31 million syndicated
loan
December 2000
Privatisation of Sofiyska Voda
Brno Waste Water Treatment Plant
Czech Republic
€47.5 million syndicated
loan
December 1999
Operation wastewater treatment plant
Maribor Waste Water Concession
Slovenia
€14.8 million
loan
April 1999
Construction and operation of wastewater treatment plant
Budapest Wastewater Services Privatisation
Hungary
€13.1 million
equity investment
December 1998
Partial privatisation of waste- water services companies
St Petersburg South-West Wastewater Treatment Plant
Russian Federation
€105 million
loan
November 2002
Construction and operation of wastewater treatment plant
Apa Nova Water Treatment Plant
Romania
€188.4 million
loan
December 2002
Modernisation of the Crivina Treatment Plant

8. How do we Define a PPP?
A PPP is a contractual agreement between a public agency (i.e. municipality) and a private entity
Through this agreement, the skills and assets of each sector (public and private) are shared in delivering a service or facility for the use of the general public
Each party also shares in the risks and rewards potential in the delivery of the service and/or facility
Agreements between the public and private entities differ in their allocation of risks and responsibilities, in the ownership of the assets and their duration

9. Main Options for PPP and Degree of Risk Transfer
Privatisation
Build-Operate-Transfer
Concession
Degree of Private Sector Risk
Lease
Management Contract
Design-Build
Government
Degree of Private Sector Involvement

10. PPPs in Transition Economies
PPPs meet the transition test
Utilisation of the private sector
Transparency and competition
Priority infrastructure investments
Efficiency and lower costs (public sector comparator)

11. Typical Concession Structure
Government
Concession Contract
Loan Agreement
Concessionaire
Equity
Shareholders
Construction
Contract
Operation
Contract
Contractor
Operator

12. Pros and Cons of Different PPP Structures
Service Contract
Management Contract
Lease
Concession
BOT
Description
Private sector performs specific service. Public sector remains responsible.
Operation and maintenance of utility transferred to private sector.
Private sector leases assets of utility and operates and maintains them.
Private sector has right to use assets, and responsible for operation, maintenance, and investments. Public sector owns assets.
Private party builds and owns asset, then transfers it to public sector.
Pro
Private sector expertise for technical tasks. Public sector keeps control.
Allows improvement in management and cost control. Prepares for greater private involvement
Strong incentive for private sector to perform.
Prepares for greater private involvement
Passes full responsibility for operations and investments to private sector.
Wholly private funding.
Con
No private sector investment. Limited risk sharing.
No private sector investment. Little incentive to reduce costs and improve services.
No private sector investment. Administratively demanding on public sector.
Limited to stable political and economic contexts.
Lengthy process and high development costs.

13. How are PPPs in EU Markets Evolving?
Time
(Years) 9
Widespread Use of PPPs
Spain 7
Czech Rep
Hungary
Greece
Poland
Slovakia
Some Projects Implemented
Slovenia
Romania
Bulgaria 5
Italy
Croatia
Estonia
Pathfinder or Single Projects
Latvia
Lithuania
Russia
Ukraine
Kazakhstan 4
Interest
Kyrgyz Rep
Albania
Bosnia/Herz
FYR Macedonia
Belgium
Serbia/Montenegro 2
Belarus
Moldova
Armenia
More difficult
Azerbaijan
Georgia
Tajikistan
Turkmenistan
Uzbekistan

14. Water supply and wastewater treatment
Investment challenges
Meeting EU water and wastewater standards
Need to increase investments in maintenance and asset renewal
Improve water supply standards
Improve collection and treatment of sewage
Improve operational and financial performance of municipal water and sewerage companies
EBRD water and sewerage Projects

15. EBRD in waste management projects
Investment challenges
Meeting EU waste standards
Efficiency and frequency of collection of waste
Improve adequacy of waste disposal
Prevent groundwater contamination due to inadequate treatment of leachate
Need to organise waste management systems
EBRD is experienced in structuring waste management projects

16. EBRD in urban transport projects
Investment challenges
Key factor in promoting economic growth
Rehabilitation of public transport in urban areas and need to replace ageing and operating equipment
Improve financial performance of transport operators to allow access financing
Need to introduce public service contracts between transport authority and operator
Investment in public transport needed to counter the negative effects of rapid motorisation

17. EBRD offers Several Financing Structures
EBRD will structure each product according to project needs
Limited or non-recourse project financing to public or privately-owned project companies; senior or subordinated debt
Loans
Equity
From pure to portage equity in project company
Various forms of leveraged leasing structures for creditworthy entities
Leasing
Partial guarantees
Partial risk, credit and specified event guarantees

18. EBRD investment selection criteria
Financial, economic, legal and technical viability
Creditworthiness of borrower, sponsors and guarantors
Project would need to contribute to structure and extent of markets, institution building, and/or market-based skills and innovation
Legal framework would need to allow PPP arrangement and enforceability of contracts
Technology would need to be appropriate for site and service/performance required

19. Some Lessons What our experience has taught us…
Establish Dedicated Team
Realistic Expectations
Financial and Contractual Basis
Motivation of Public Sector to “champion” commercially oriented approach
Understand “user pays” and “cost recovery” concepts
Accept possible need for tariff adjustments
Establish clear project parameters up front
Establish all timing obstacles

20. Contact details Giulio Moreno Davor Inđić Principal Banker
Zagreb Resident Office
Miramarska 23/111, Zagreb
Tel:
Fax:
Head of Sarajevo Resident Office
Unitic Towers, 15th floor, Tower B
Fra Andela Zvizdovica 1, Sarajevo
Tel: Fax: